Director of Public Prosecutions v Condo
[2008] SADC 25
•13 March 2008
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
DIRECTOR OF PUBLIC PROSECUTIONS v CONDO
[2008] SADC 25
Reasons for Ruling of His Honour Judge Tilmouth
13 March 2008
CRIMINAL LAW
JUDGMENT AND PUNISHMENT - ORDERS FOR COMPENSATION, REPARATION, RESTITUTION, FORFEITURE AND OTHER MATTERS RELATING TO DISPOSAL OF PROPERTY - CRIMINAL ASSETS CONFISCATION ACT 2005 (SA).
Section 48 of the Criminal Assets Confiscation Act 1996 (SA) (the Act) permits the Director of Public Prosecutions to apply for an "instrument substitution declaration" in respect of property owned by a person committing a serious offence, even though it is neither the proceeds of or used in the commission of that offence. Section 47 permits forfeiture of that property.
Held: dismissing the Director's application.
(1) The property, the subject of the insntrument substitution application was not proved to be of "the same nature or description as the property that was the instrument of the offence" within the meaning of s48 of the Act.
(2) It has not been proven that the property the instrument of the offence is not available or not able to be made the subject of an order for forfeiture under s48(c).
(3) An order for forfeiture should be refused on discretionary grounds under s47(4) and in any case orders for exclusion from forfeiture were appropriate under s58(1)(c).
Criminal Assets Confiscation Act 1996 (SA) s33, 34, 36, 38, 47, 48, 51, 54, 58, 60, 218, 220; Real Property Act 1886 (SA) s156, referred to.
District Court Rules 2006 R310; Director of Public Prosecutions v Le (2007) 15 VR 352; Calverly v Green (1984) 155 CLR 242, 255 and 266; Nelson v Nelson (1995) 184 CLR 547; Fulton v 523 Nominees Pty Ltd [1984] VR 200; Le v Director of Public Prosecutions Vic (2007) 171 ACrimR 196; Lyall v Solicitor-General [1997] 2 NZLR 641; Director of Public Prosecutions v Kobelt & Ors [2007] SADC 57; MWJ v R (2005) 222 alr 436, (2005) 80 aljr 329.; DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510; Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 ; stralian Finance Direct Ltd v Director of Consumer Affairs Victoria (2007) 82 ALJR 202, applied.
DIRECTOR OF PUBLIC PROSECUTIONS v CONDO
[2008] SADC 25The applications
By application filed in this Court on 3 December 2007 as amended, the Director of Public Prosecutions (SA) (“the Director”) seeks certain orders pursuant to s47 and s48 of the Criminal Assets Confiscation Act 2005 (SA) (“the Act”). The Act came into force on 2 April 2006,[1] wholly repealing the Criminal Assets Confiscation Act 1996 (SA).
[1] SA Government Gazette 9 June 2005 p1714
Expressed in simplified terms, this application seeks forfeiture to the Crown of the defendant Paul Condo’s interest in specified real property, situated at Renmark West (“the Renmark property”). A restraining order over the “defendant’s interest in the property” was granted by this Court on 26 April 2007. The order was subject, amongst other things, to “any right, title or prior interest of a mortgagee under a mortgage lodged for registration” prior to that date. The Director further seeks an “instrument substitution declaration” as defined in s48 of the Act, effectively enabling the Court to declare the Renmark property to be the subject of a forfeiture order under the Act. Once such an order is made, the property specified in the order “vests absolutely in the Crown”: s90(1)(a). When it does an “Administrator” appointed under section 190 must “as soon as practicable dispose of the property” thereafter: s93(1).
There is also concurrently before the Court an application filed on 21 August 2007 by the interested parties, Salvatore and Maria Condo, the parents of the defendant. By this application they apply for orders excluding the Renmark property from the restraining order, pursuant to s36 of the Act. That part of the proceedings is no longer on foot. However applications for exclusion orders pursuant to s58 and s60 and if necessary for declaring the nature, extent and value of their interest in the Renmark property under s78 and 80 of the Act, certainly are. If granted, an exclusion order would serve to remove the excluded property or interest, from the ambit of forfeiture.
Procedural issues
The respective applications come before the court by way of civil proceedings. The usual rules of evidence apply to such proceedings under the Act: s218. Each party bears the onus of “proving the matters necessary to establish the grounds for making the order” they apply for, on the balance of probabilities: s220, subject perhaps to the Briginshaw onus: DPP v Willis[2].
[2] (1996) 66 SASR 590; 88 A Crim R 264
The Director relies upon the affidavit of Mark Stewart Hay sworn 23 March 2007, filed originally in support of the restraining order, the affidavit of Janette Irena Markotic sworn 20 August 2007 and a further affidavit of Mr Hays sworn on 9 January 2008. The first two affidavits are for all intents and purposes largely formal, essentially proving the prerequisite offence and the underlying interest of the defendant in the Renmark property, neither of which are in issue as such.
The third is more substantial. In particular Mr Hay exhibits a number of bank records delivered under warrant issued by Mr Ackland SM on 4 September 2006, directed to the National Australia Bank Ltd. These include details of mortgages, loan facilities and a business cheque account. The defendant and the interested parties rely on the affidavit of Salvatore Condo sworn and filed on 21 August 2007.
Procedure is governed by r310 of the District Court Rules 2006, which provides the evidence for the purposes of proceedings under the Act is to be given by way of affidavit, ‘subject to any contrary direction by the Court’: r 310(2)(b). Such a direction was made, without opposition from the Director, for Mr Salvatore Condo to give oral evidence. He was cross-examined, although not at great length.
The defendant was furnished the opportunity a number of times during the course of proceedings to give evidence, as he was entitled pursuant to s51(1) of the Act. He declined, whether on his behalf or in support of his parent’s application. Nor was he sought to be called as a witness by them. He did make brief submissions towards the conclusion of the case, after having the benefit of hearing the case for the other parties. It remains only to mention that s51(2) facilitates proof in relation to a person’s conviction of a serious offence, by permitting the court to have regard to the transcript or any evidence given in the criminal proceedings, but this section would appear to be of no other practical operation in relation to proof of other issues arising for determination in this case. Proof is dealt with by sections 218 and 220, as noted above. In any case neither the transcript of the criminal proceedings against the defendant nor any evidence in those proceedings, is before the court in these matters: ss51(2)(a) and (b).
Underlying facts
The Director’s application is founded in the first instance upon the conviction of the defendant on 13 March 2007 in the District Court, for taking part in the production of cannabis. This conviction followed a plea of guilty and committal for sentence in the Berri Magistrates Court. The defendant was sentenced on 30 August 2007 to imprisonment for three years with a non-parole period of eighteen months, to commence from that day. This was admittedly a “serious offence” as defined in section 3 of the Act.
The record reveals the underlying offence was said to have taken place between 26 September 2005 and 23 February 2006, that is before the Act commenced operation. The conviction was entered afterwards. There is evidence showing the offence took place near Cobera in the Murray Mallee on a rural property abutting the north-western end of the Billiatt National Park. Although little attention was devoted to the precise location, it is not controversial that this is some distance from Renmark.
The proven circumstances are that on 22 February 2006 police located a large cannabis crop growing in remote scrub on the Cobera property, comprising some 900 cannabis plants of various heights, alleged to have a commercial value of one million dollars. They were watered by an illegal bore, allegedly tended by two persons, one the defendant, from a camp-site located nearby. The case against him centred on finger prints detected on an aerosol can and a magazine “Growing Dope the Australian Way” seized from the campsite. As it turns out his DNA was also found on a number of cigarette butts and a toothbrush found on site.
Obviously the Cobera property was used as an instrument for the commission of a serious offence and is for that reason “tainted property” as defined in s3. This property was owned by a third party living in Adelaide, who allowed it to be share-farmed by a neighbouring farmer. More precisely the Renmark property is the whole of the land comprised in Certificate of Title Register Book 5423 Folio 806 and is described as Allotment 468, Filed Plan 177674. The registered proprietors are the defendant and Salvatore and Maria Condo “as joint tenants”.
The section 48 application
Before reaching the point of forfeiture, it is first necessary to obtain an instrument substitution declaration under s48, pertaining to the Renmark property. Should such an order be made it would then fall within the definition of “tainted property”. Section 48 of the Act, under which the Director’s primary application is brought, provides:-
CRIMINAL ASSETS CONFISCATION ACT 2005 - SECT 48
48—Instrument substitution declarations
A court determining an application for a forfeiture order relating to a person's conviction of a serious offence may, on the application of the DPP, declare property to be subject to an "instrument substitution declaration if satisfied that—
(a)the convicted person had, at the time of the offence, an interest in the property; and
(b)the property is of the same nature or description as property that was an instrument of the offence (whether or not the property is of the same value); and
(c)the property that was an instrument of the offence is not available for forfeiture or is not able to be made the subject of an order for forfeiture.
The avenue of redress by means of instrument substitution is clearly designed to affect, or at the very least facilitate, the recovery of the assets from criminals who structure their offending in a way that avoids forfeiture of property owned by them, especially by using the property of others as instruments of their own offending. When introducing this Legislation into Parliament the Attorney-General said in the course of the second reading speech in relation to the intended purpose of instrument substituted declarations:-[3]
Again, the Bill provides a complete code for all of these forms of forfeiture, including the protection of the rights of innocent third parties, … One novel feature bares highlighting. That is the inclusion of instrument substitution declarations. The reason for them is that canny crooks may use rented cars or houses (for example) as instruments of crime rather than their own in an attempt to forestall the forfeiture process. The rented property is owned by an innocent third party who cannot justly be made subject to forfeiture. An instrument substitution declaration permits a court to substitute equivalent property owned by the perpetrator for the property used as an instrument of crime but now owned by the perpetrator.
[3] Hansard, House of Assembly 10 November 2004, P844.
The mechanism by which this intended purpose is achieved, is one effectively deeming property belonging to the offender (or in which he or she owns an interest) of the same nature or description as property used as an instrument of the offence, to be “tainted property”. It is self-evident that before making an order for substitution, each of the three limbs of ss47(1)(a)(b) and (c) must be satisfied.
There is no doubt as to the first of these, namely that the defendant was convicted of a serious offence as defined (s47(1)(a)), or that the defendant holds an interest in the Renmark property. Property is defined in s3:
“property” means real or personal property (tangible or intangible) including—
(a) a chose in action; and
(b) an interest in property;
The interest the defendant holds on the face of the title as tenant in common holding a one-third legal interest in the Renmark property, clearly comes within that description. That conclusion does not overlook the submission of Mr Doyle for Mr and Mrs Condo, that the interest held by him is not a beneficial interest. Rather it is to recognise as he accepted, that the defendant ‘on any view, is a person who claims an interest in the property’ which he described as a ‘lesser legal interest’.[4] As will become apparent however, the nature and value of that interest are quite another matter.
[4] Transcript 16 L 32-33 and 17 L31-32 respectively; see also T43 L23-27 and T49 L34-38
Property of the same nature or description?
The requirements of ss48(b) are a much tougher nut to crack. Sub-section 48(b) is referable to property of “the same nature or description as property that was the instrument of the offence”. Translated to the facts of this case, that means the Renmark property must be shown by the Director to be of “the same nature or description” as the Cobera property. According to the Oxford English Dictionary ‘nature’ includes ‘the essential qualities or properties of a thing…giving it its fundamental character’ and ‘description’ means ‘setting forth in words by mentioning recognisable features or characteristic marks…”. Hence one may be the physical and the other the verbal manifestation of much the same thing. In any case both are clearly words of limitation or qualification.
There is a distinct biblical connotation in the notion “the same”, for it appears to contemplate making substitution declarations on the broad basis of an “eye for an eye” or “a tooth for a tooth”.[5] There would be no apparent difficulty in applying the section where quite specific property is involved, such as a motor vehicle for instance.
[5] Exodus Cha 21 V23
It appears from the material available to the court, that the Cobera property comprises remote scrub in the Hundred of Allen.[6] There was a campsite and submersible bore powered by a petrol generator found there and a shed was erected some three kilometres from the site of the cannabis plantation. Obviously it can be inferred that it was a large remote rural property having little infrastructure. There was no home or residence.
[6] Affidavit of Mr Hay sworn 23 march 2007 paragraphs 6
The affidavit of Salvatore Condo reveals that he and Mrs Condo purchased the Renmark property for about $63,000 in about 1979, funded from savings and a loan advanced by the Commonwealth Bank. They built a new house there, in which they lived and raised their family. It appears until 2002, they also operated a horticulture business from the property, trading as ‘Condo Brothers’. In the course of oral evidence he explained the property comprised some 30 acres and was situated four or five kilometres ‘outside the town of Renmark West’.[7]
[7] Transcript 26 L27-35
It was submitted for the Director the qualification ‘nature or description’ was no more demanding than to permit substitution declarations to be made with request to generic property. Hence as real property was used as an instrument of this offence, other real property in which the defendant holds an interest, may be the subject of instrument substitution. The problem with this submission is that the legislation could have readily said so, by omitting the qualifying words altogether, or to have provided, for instance, “the property is either real or personal property and the instrument of the offence was real or personal property”. The proffered construction accords the expression “same nature or description” practically no operative affect. This language reflects the need for a degree of parity or recognisable similarity between the instrument property and that liable to substitution. A simplistic generic comparator of real property for real property is too broad to afford any meaningful content to the limiting words, whereas house for house, home-unit for a home-unit, town house for a town house, farm for farm, might conceivably be too narrow.
In the event it has not become necessary to confront these difficult issues of construction and ultimately of degree. Given the paucity of the evidentiary material presented to the court, it is inescapable that the Director has failed to produce sufficient evidence to enable the court to make a considered finding on balance, that the respective properties are of the same nature or description. That is to say the evidence does not permit the court to sufficiently compare the “essential qualities or properties” or the “features or characteristic” of the two respective pieces of real estate, in order to determine whether they are of the “same nature or description”. Indeed on the evidence, so far as it went, they hardly appear to be real property fitting that criteria at all.
An alternative argument was mounted on behalf of the intervenors, to the effect that when considering whether the respective properties were of the same nature or description, it was necessary to focus on the concept of “property” under the Act, which if employed consistently, must relate to the actual interest in the property concerned. On this construction, since the defendant’s interest in the Renmark property was partial, in the nature of either a trust or a one-third legal interest, and the interest of the owner in the property that was an instrument of the offence, is full legal ownership, the two interests were not comparable and hence not of the “same nature and description”. It follows as the argument progressed, ‘the intention of the legislation wasn't to make vulnerable some lesser interest’ than the particular interest held in the tainted property.[8]
[8] Transcript 52 L29-31
This consequence was said to flow from the decision of the High Court in Director of Public Prosecutions for Victoria v Le,[9] a case principally concerned with exclusion from forfeiture under s52(1) of the Confiscation Act 1997 (Vic), the counterpart of which is in s59 of the Act. As a general principle it can be accepted “the property and the applicant’s interest in the property, are … separate and distinct” under the Act: Director of Public Prosecution (Victoria) v Le,[10] Commonwealth Director of Public Prosecutions v Hart[11] and Director of Public Prosecutions (SA) v Kobelt & ors.[12]
[9] (2007) 240 ALR 204; (2007) 82 ALJR 92; [2007] HCA 52
[10] (2007) 15 VR 352; (2007) 169 A Crim R 177 at [50]
[11] (2007) 172 ACrimR 57.
[12] (2007) 48 LSJS 387; [2007] SADC 57 at [20-21]
The principal issue in Le was the construction of the phrase “property in which the applicant claims an interest" as it occurs in s 52(1) of the Victorian legislation, an expression not found in ss58 and 59 of the Act. It is however to be found in s51 wherein it forms the foundation of the right to be heard in relation to a forfeiture application. The particular point of construction under contention in Le was whether the power to exclude property from forfeiture was limited to the applicant's “partial” interest in the property, or whether the exclusion related to the “whole” of the property in which the applicant held an interest.
The definition of “property” under the Act was noted above. It is not that dissimilar in terms to the equivalent in the Victorian legislation, as contained in s3(1):
“property” means real or personal property of every description, whether situated within or outside Victoria and whether tangible or intangible, and includes any interest in any such real or personal property.
…
“interest”, in relation to property, means --
(a) a legal or equitable estate or interest in the property; or
(b) a right, power or privilege over, or in connection with, the property.
As Kirby and Crennan JJ point out in Le, in a comment of equal application to the definitions of “property” in both pieces of legislation:[13]
[81] Far from distinguishing “property” as signifying only a thing or an object (eg, Blackacre) from “property” as signifying a “legal relationship with a thing”[14] (eg, a joint tenancy), the definitions in s 3(1) indicate that the statutory meaning of property comprehends “property” in both manifestations.
[13] Above at [81], Gleeson CJ agreeing on this point
[14] Yanner v Eaton (1999) 201 CLR 351 at [17], 73 ALJR 1518 per Gleeson CJ, Gaudron, Kirby and Hayne JJ
Such distinctions are not maintained when it comes to the regime of instrument substitution declaration under s48. Section 48 says nothing to convey the intention that the convicted person’s interest in property has to be a comparable interest to that of the interest held in the tainted property at that stage in the confiscation process. On the contrary, the only comparator relates to physical rather than legal attributes or characteristics, inherent in the phrase “same nature or description”. This is barely surprising, as if equivalence of interest in property was the criteria of substitution, that would fall to be determined by the co-incidence of legal interests and nothing else. To read the legislation in the manner contended for, would permit it to operate by happenstance. That construction would obviously produce incongruous and plainly unintended results. The submission for the interested parties on this question must therefore be rejected. The better interpretation is one that is consonant with the statutory language and better fulfils the objective of the Act: Australian Finance Direct Ltd v Director of Consumer Affairs Victoria.[15]
[15] (2007) 82 ALJR 202.
Not available or not able to be made the subject of an order for forfeiture?
The final of the three requirements, that under s48(c), is equally one not so readily disposed of as s48(a). The first limb, “not available for forfeiture” appears to be directed to innocent parties who happen to own property becoming liable to forfeiture upon that property being used was an instrument of an offence.
Lying behind the Director’s submission is the assumption that the owner of the Cobera property was an innocent purchaser: ss7(2)(a) and was not involved in the commission of a serious offence: ss58(1)(c)(i). The Director contended that it was not appropriate to seek forfeiture of the Cobera property as “the owner had nothing to do with the commission of the offence” and because the “whole purpose of s48 is that if offenders are using property which they don't own to commit an offence then you can target property which they do own, but you don't target the innocent party's property”.[16]
[16] Transcript 33 L37-34 L 1 and L27-L31
As a question of policy this may be readily accepted. Whether that policy directly resonates in the legislation is not quite so apparent. There is nothing in s24 of the Act protecting an innocent person against a restraining order over property used as an instrument of an offence and nothing in s47(3)(c) protects an innocent owner from forfeiture. The mode of relief provided for parties not involved in the offending is to apply for exclusion under sections 34, 35 and 36 in the case of restraining orders and under sections 58, 59 and 60 in the case of forfeiture. If such orders were sought and exclusions orders granted, the Cobera property could thus be properly said to be “not able to be forfeited”. Otherwise s7(2) applies.
The Cobera property was an instrument of the offence and therefore is ‘tainted property’ as defined under the Act. As such it is liable to forfeiture: Taylor v Attorney General for SA.[17] For purposes relevant to the present application, that property “only ceases to be … an instrument of” the offence “if it is acquired” … without the owner “knowing, and in circumstances that would not arouse a reasonable suspicion that the property was … an instrument of an offence”: s7(2)(a).
[17] (1991) 55 SASR 462.
The question now for the court to determine is whether it is unavailable for forfeiture, or unable to be made the subject of an order for forfeiture. Either is sufficient from the Director’s point of view. Property becomes available for forfeiture under s47 generally speaking, in one of three ways. The first arises on proof of a person being convicted of a serious offences when the property is used as an instrument of that offence: ss47(3). The second and third occur when the property is covered by a restraining order in force in the circumstances described in s47(3)(b) or s47(3)(c). Only s47(1)(a) is available in this instance, simply because there never was any restraining order over the Cobera property as contemplated by either ss47(3)(b) or ss47(3)(c).
The Director rather perfunctorily asserted the Cobera property was not available for forfeiture, simply because no forfeiture application was made against the land owner. His written submission was more substantial:
…the [Cobera] property in not available for forfeiture or is not to be made the subject of an order for forfeiture. There is no allegation or evidence that the owner of the …property was involved in or was aware of the commission of the offence. There is no application for forfeiture of the … property.
This submission is literally correct, for there is no such evidence. But the situation is more fundamental than that, as there is no admissible material before the court proving there is no such evidence. For an example, there is no affidavit from the officer-in-charge of the investigation against the defendant, deposing to the position qua the landowner and there is no affidavit from the DPP or an appropriately authorised prosecutor, who deposes to reviewing the file and stating there is no such evidence. Nor is there any evidence of a kind directed to the considerations referred to in s7(2)(a), paraphrased above. And no transcript or evidence relating to these proceedings against the defendant are produced.
It follows the first limb of s48(c) is not made out as the Director has failed to prove by admissible material directed to that end, that the Cobera property is not available for forfeiture. Nor for that matter is there any material before the court relating to the share farming arrangements or eliminating that potential source as an available means of forfeiture. That is however not the end of the inquiry.
What then of the second alternative limb, “not able to be made the subject of an order for forfeiture”? The expression “not available” for forfeiture appears to be directed to circumstances where proceedings for forfeiture would not succeed under the Act, so that “not able to be made the subject of an order for forfeiture” must be directed to different circumstances than these. When speaking in terms of “not able”, Parliament appears to have in mind some physical or other obstacle, impeding the ability of the court to make a forfeiture order. Examples coming to mind are the property being destroyed, or damaged to the point of no longer retaining any realisable value, or some kind of security, lien or encumbrance, negating the relevant interest in the subject property, or rendering the relevant interest nugatory.
There is the potential for that kind of contingency in this case, as the original restraining order was ‘subject to any right, title or prior interest of a mortgage lodged…prior to’ making the order. The Renmark property is subject to a National Bank of Australia mortgage, under which the outstanding liability as of 29 November 2007 was $574,192.07, subject to adjustments.[18] The court has been told an application for forfeiture was lodged by the bank in the Supreme Court and is pending. Assuming liability under the mortgage exceeded the value of the property and the mortgagee holds priority over the interests of the Crown, it would then appear as if it may “not be able to be made the subject of an order for forfeiture”. That point has not however been reached on the material presently available to the court
[18] Exhibits D1 and D2.
Whether the defendant’s interest is able to be made the subject of an order for forfeiture may also depend on the nature of his interest in the Renmark property. It then becomes necessary to assess Mr and Mrs Condo’s claim that this interest is no more than a bare legal interest, of little or no value. The factual basis for this stems initially from affidavit filed on their behalf by Salvatore Condo. So far as relevant to the present question, the affidavit read:-
7. In 2002, the partnership fell into financial difficulty and went into receivership.
8.The Renmark property was security for the partnership’s debt to Elders Rural Bank (“Elders”).
9.In 2002, Elders recovered the partnership’s debt to it by enforcing its security over the Renmark Property and it was sold at auction.
10.At the time of the sale of the Renmark property, I was advised that my wife and I should not purchase it at the auction. However we wanted to retain it. I was advised that someone else could bid at the auction for me. Therefore, I asked my son to bid for the Renmark property at the auction. He was the successful bidder at a price of $600,000 and signed the contract as purchaser. It was my understanding that he was purchasing the Renmark property for me and my wife.
11.My wife and I financed the purchase of the Renmark property with our savings and a loan from my two brothers totalling $200,000. Also, a loan was acquired in the sum of $400,000 from the National Australia Bank secured by mortgage. The mortgage to the National Australia Bank was signed by me, my wife and my son as mortgagors because the Transfer was expressed to be to me, my wife and my son. My son had no money and did not contribute any funds to the Renmark property.
…
13.I understood that my son was holding his one-third share in the Renmark property on trust for my wife and I. My son remained named as a joint tenant on the property’s Certificate of Title as my wife and I intended that the property pass to him in the event of our death. In the meantime, it was our intention that my wife and I could deal with the property for our own benefit. My son’s interest in the property is accordingly a bare legal interest.
…
20.I ask that the Renmark property be excluded from the Restraining Order pursuant to Section 36 of the Criminal Assets Confiscation Act for the reasons mentioned above.
21.I ask that I be granted permission to make this application on special grounds that my son has no beneficial interest in the Renmark property and that he holds his interest in the property on trust for my wife and I.
He was cross-examined briefly in relation to the paragraph 13 in particular, as recorded in the following exchange:[19]
[19] Transcript 27 L3-L21
Q. You say in your affidavit that you understood that your son was holding his one-third share in the Renmark property on trust from your wife and yourself.
A. That's correct.
Q. Is there any documentation in relation to that trust.
A. No, there is none.
Q. Are there any terms of the trust.
A. No terms.
…
Q. How was he appointed trustee.
A. Well, he had to buy the property back from my wife and myself so we left his name on the papers at the time.
Q. Does he receive any remuneration as trustee.
A. No.
Q. Are there any trust moneys.
A. No.
There is no doubt that on the face of the title, Paul Condo owns a one-third legal share in the Renmark property. Even so there is no reason to doubt the family arrangements were as deposed to by Salvatore Condo. This state of affairs was not seriously disputed by the Director. Salvatore Condo was not cross-examined on any alternative basis. As pointed out in the joint judgment of Gummow, Kirby and Callinan JJ in MWJ v R,[20] in connection with the rule in Browne v Dunn:[21]
[39] One corollary of the rule is that judges should in general abstain from making adverse findings about parties and witnesses in respect of whom there has been non-compliance with it. A further corollary of the rule is that not only will cross-examination of a witness who can speak to the conduct usually constitute sufficient notice, but also, that any witness whose conduct is to be impugned, should be given an opportunity in the cross-examination to deal with the imputation intended to be made against him or her.
[20] (2005) 222 ALR 436; (2005) 80 ALJR 329.
[21] (1893) 6 R 67.
There was some argument as to the meaning of the trust erected by the circumstances. The probabilities are that there was a trust, essentially because the defendant applied no monies to the repurchase, so it would be quite inequitable for him to enforce the full extent of any legal interest in the property in the circumstances. There was no evidence of him making any contribution towards the Renmark property. The situation was that the repurchase was funded by Mr and Mrs Condos from personal loans and the loan of $400,000 acquired from the National Australia Bank.
The trust may possibly have been a bare trust without any beneficial interest, requiring only Paul Condo to execute a transfer of the property if and when required to: DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW),[22] Herdegen v Federal Commissioner of Taxation.[23] On the other hand it was more likely on the evidence as it was, that a simple resulting trust was created, because Mr and Mrs Condo never intended the defendant should be bestowed with any legal or beneficial interest to the extent of one third of the value of the property. Either way, the consequence is the same for the purposes of these proceedings.
[22] [1980] 1 NSWLR 510
[23] (1988) 84 ALR 271 at 281 per Gummow J
The applicable principles are well settled by decisions of the highest authority. In the absence of evidence to the contrary, a registered proprietor of real estate is presumed to own the beneficial equitable interest in it, but where the registered proprietor purchases property and places it in the name of someone else, the law presumes that person holds the property on a resulting trust for the purchaser who paid for the acquisition of it: Calverly v Green[24] and Nelson v Nelson.[25] This is what happened according to the evidence given in this case.
[24] (1984) 155 CLR 242 at 247, 255-256 and 266-267
[25] (1995) 184 CLR 538 at 547-548
Given the close filial ties between the family and the expectation of inheritance, it is not difficult to accept that the defendant’s name was placed on the title for convenience sake. It is clear finances were so organised for the same reason. The arrangement is not inherently unlikely and is not at all uncommon, especially where rural properties are concerned. In the result, as the defendant’s interest in the Renmark property was not beneficial, that interest is not able to be made the subject of forfeiture within the meaning of s48(c). Accordingly the application under section 48 is refused on account of the failure to demonstrate that the matters contained in both ss48(b) and ss48(c) are satisfied.
Should a forfeiture order under s47 be made?
The next issue argued by the parties was the application of s47. This part of the inquiry passes to the discretion conferred by the terms of s47(4), in the following terms:
(4)In considering whether it is appropriate to make a forfeiture order under subsection (3) in respect of particular property, the court may have regard to—
(a) any hardship that may reasonably be expected to be caused to any person (other than the suspect) by the operation of the order; and
(b) the use that is ordinarily made, or was intended to be made, of the property; and
(c) the gravity of the offence or offences concerned; and
(d) any other matter the court thinks fit.
When exercising the power to make an order for forfeiture, the Court is required to have regard to any hardship that may be expected to be caused to any person other than the suspect, that is other than the defendant Paul Condo, in this instance. Any hardship in the present case will necessarily fall into the lap of Mr and Mrs Condo, to the extent that an order of forfeiture diminishes their interests as full beneficial owners.
The evidence was that the Renmark property was repurchased for $600,000 and remains subject to a mortgage presently standing at around $574,000, in round figures. The property was put on the market at $750,000 some time ago but failed to attract a purchaser. This is hardly surprising given the widespread hardship caused by drought conditions over the past few years and at the present time in the Riverland. It has since been put up for sale at $700,000, without success. Mr Condo explained in his oral evidence that he could not afford to sell at any less than this price, because of the obligation to meet outstanding debts. Sale at any lesser figure would place him in a situation of loss.[26] In those circumstances there can be no doubting hardship to Mr and Mrs Condo. Likewise an order of foreclosure under the mortgage would only serve to crystallise the loss, at the present time.
[26] Transcript 24 L2-L30
The next discretionary consideration, that of the use to which the property is and was intended to be put (s47(4)(a)), appears to be neutral, hardship aside. It was always devoted to rural horticultural pursuits and as a family residence. The evidence appears to be that these uses would continue, as best they could under present conditions, or the property sold in order to clear debt. Neither party devoted any particular attention to this consideration as pointing in either direction.
Turning then to the gravity of the offence concerned (s47(3)(c)), the offence was certainly serious, given the substantial nature of the crop and the likely proceeds it might yield. The substantial sentence of imprisonment is a mark of just how serious it was. This consideration is compounded by a previous conviction of the defendant in 1991 for the cultivation of cannabis, on that occasion involving 600 cannabis plants. There do not appear to be any other matters to consider under (s47(4)(d)). Hardship is obviously a strong factor weighing against forfeiture, whereas the seriousness of the offence strongly pulls in the opposite direction. The balance is dependent on the value of the particular interest held by the defendant, for if it is worthless, there could be no relevant hardship.
The finding of the court is that the property must have been the subject of a trust. In that circumstance there is no hardship to Mr and Mrs Condo, so that an order for forfeiture would have been otherwise appropriate. Likewise had the defendant contributed to the purchase of the property, then to the extent that his legitimate interest was in jeopardy, there could be no hardship on that account alone. As he is in gaol, it is likely the NAB would first enforce the mortgage as against Mr and Mrs Condo. Had his interest been measured as a one-third legal interest, the consequent hardship to Mr and Mrs Condo would have in any case been so great that the proper exercise of discretion would have been to refuse a forfeiture order.
The value of the Renmark property?
At the time of making a forfeiture order, the court is required to specify the value under s54 of the Act. Although it is not strictly necessary to proceed that far, as it was a matter pursued by both parties, it is desirable to deal with it. Section 54 provides:
54—Forfeiture orders must specify the value of forfeited property
A court must specify the amount it considers to be the value, at the time the order is made, of the property (other than money) specified in the forfeiture order.
At first sight this provision appears to require a valuation at large, rather than that of the particular interest sought to be forfeited. On closer examination the intention is not so clear, firstly because the heading suggests it is the value of the precise property under forfeiture to be considered and secondly because the terms of the section itself specify “the property … in the order” must be valued. That consideration is in narrower terms than simply “property”. Of course the property specified in the order will include a reference to the Renmark property, however the value of that and the value of the defendant’s particular interest are two completely different exercises and of two markedly different values, on any view of the facts.
Inescapably the statutory remit is to value the ‘property specified in the forfeiture order’. Based on the authority of Director of Public Prosecutions for Victoria v Le[27] that is capable of incorporating any "real or personal property in which the applicant claims an interest”. In Le the High Court rejected the notion that tainted property meant the whole of the property used in connection with an offence, so the conclusion that s54 requires a valuation of the precise interest the subject of forfeiture, must necessarily follow. Mr Gupta accepted this was the correct interpretation and further accepted that the defendant’s equity in the property was subject to the mortgage.[28]
[27] (above at [84])
[28] Transcript 5/3/08 P4 L37 – P5 L23.
The property was purchased in October 2002 for $600,000, so that must furnish a starting point of sorts. Paragraph 5.3 of the March 2007 affidavit of Mr Hay places a capital value on the property at $620,000 as of 1 January 2006. It has failed to yield a ready, willing and able purchaser in the open market at either $700,000 or $750,000, so the overall unencumbered value, must be something less than these. No evidence of land values since January 2006 in the area was produced. It is well known that the Riverland has fallen on harsh times due to prolonged drought conditions, as Mr Gupta accepted, so that property used for agricultural purposes must have fallen in value in recent times.
Doing the best one can on the basis of the limited evidence produced on either side, the court determines the unencumbered value of the whole Renmark property to be $650,000, before taking the mortgage into consideration and $80,000 afterwards. Had the defendant’s interest been a full one-third interest as tenant in common, the value of that interest stands at $26,600 in round figures. As the property remains subject to mortgage, there could be no order for possession or sale under s69 of the Law of Property Act 1936 without the consent of the mortgagee and it remains subject to the mortgagee’s interest in any event: Fulton v 523 Nominees Pty Ltd.[29] There is no equivalent under the Act to s41(2) of the Confiscations Act 1997 (Vic) which serves to protect “every mortgage, charge or encumbrance” over forfeited property, but as s56 of the Real Property Act 1886 (SA) gives priority to registered mortgages, the net effect is the same.
[29] [1984] VR 200 at 205.
As the particular interest in the Renmark property held by the defendant is in the nature of either a bare or resulting trust, it is of no realisable value. In the result the defendant’s interest has no value. In point of fact, as his interest is subject to a joint and several mortgage, it could never be of any value whilst liability under the mortgage was greater than the value of a one-third share as tenants in common.
The application by Mr and Mrs Condo
The initial application for exclusion was originally made pursuant to s36 of the Act, seeking exclusion of the Renmark property from restraining orders. An order for exclusion was not made at the time due to undertakings given by the Condos, pursuant to s38 of the Act. If made now an order for exclusion results in a severance of the tenancy in common: Director of Public Prosecutions for Victoria v Le.[30]
[30] [2007] HCA 52 at [92] and [102]
It was argued by the Director that the applicants have no standing to make these applications, on two grounds. Firstly it was submitted s34(2)(b) precluded such an order, as before excluding property from a restraining order, the court at that point in time has to be satisfied the property “could not be subject to an instrument substitution declaration”. The argument seems to be that once a restraining order is made, no exclusion is later possible when an order for substitution is made. However s34(2)(b) relates to considerations of restraint, calling for a different inquiry at an earlier stage in the assets confiscation process, so that it has no relevance to an inquiry under Part 4 relating to subsequent forfeiture post conviction.
In addition the submission overlooks the fact that the Court may make an exclusion order before forfeiture under s58 of the Act, which contains no counter-part to s34(2)(b). Section 58 provides as follows:-
CRIMINAL ASSETS CONFISCATION ACT 2005 - SECT 58
58—Making exclusion orders before forfeiture order made
(1) A court that is hearing, or is to hear, an application for a forfeiture order, must make an order excluding property from forfeiture (an "exclusion order") if—
(a) a person applies for the exclusion order in accordance with section 60; and
(b) the application for a forfeiture order specifies the applicant’s property; and
(c)if the forfeiture order would be one to which section 47(1)(a) or (3)(a) applies, the court is satisfied that—
(i) the applicant was not involved in the commission of a serious offence to which the application for a forfeiture order relates; and
(ii)the property to be specified in the exclusion order is neither proceeds nor an instrument of the offence; and
(d) if the forfeiture order would be one to which section 47(1)(b) or (c) or (3)(b) or (c) applies, the court is satisfied that the property to be specified in the exclusion order is neither proceeds nor an instrument of unlawful activity.
(2) An exclusion order under subsection (1) must—
(a) specify the nature, extent and value (at the time of making the order) of the property concerned; and
(b) direct that the property be excluded from the operation of the forfeiture order.
As the restraining order of 4 April 2007 was limited to Paul Condo’s interest in the property, the second submission for the Director was that as the restraining order pertains merely to the defendant’s interest in the Renmark property, s58(1)(b) is not satisfied as exclusion is not sought with respect to “the applicants’ property”.
All that s58(1)(b) requires is for an applicant is to justify his or her claimed interest in the subject property: it is a procedural rather than a substantive provision. The Director’s construction makes a nonsense of the section and would serve only to frustrate a central object of the legislation, which is to protect innocent property holders: Australian Finance Direct Ltd v Director of Consumer Affairs Victoria (above). It would have the consequence that no person holding an equitable interest could apply for exclusion, a result that is likely to cause injustice. Indeed it would have put Mrs Le out of court in Le (above) had those facts occurred in South Australia and fell for determination under the Act.
Clearly the Renmark property was neither the proceeds nor an instrument of the offence, so that ss58(1)(c)(ii) is satisfied. In the case of Maria Condo, there is no material in any way suggesting she was involved in the defendant’s offence; s58(1)(c)(i), so an exclusion order “must” be made in her case. In relation to Salvatore Condo, it was submitted that s58(1)(c)(i) precluded an order in his case, because of involvement by him in the commission of the offence. It appears he was originally jointly charged with the defendant, but that upon the defendant’s plea of guilty in the Berri Magistrates Court on 6 February 2007 “there was a finding of ‘no case to answer’ as a consequence of the plea”.[31]
[31] Affidavit of Mark Hay sworn 23/3/07 para 2.3.
In this instance, the Director relies on the sentencing remarks during the course of sentencing Paul Condo:[32]
A submersible pump was used to carry water to various sites from a well that had been sunk to a depth of 64 metres. That pump and starter panel were purchased by a Sam Condo, your father, in January 2005. They were paid for in July, 2005 by a cheque drawn on the account of S.M. and P.A. Condo, being the account of you and your father. The account remained unpaid for some time and the debt collectors were needed to facilitate payment. Paperwork at your father’s place support that the pump was supplied to him. The cheque butt for payment showed that the amount was supposedly for truck repairs and tyres.
As mentioned, power was provided at the crop site by means of a portable generator. That generator was supplied to a man supposedly named Mr P. Anderson of Government Road, Waikerie, in mid May, 2005. The man to whom the generator was supplied was, in fact, your father. The cost of the generator and parts was $5,600 which was paid in cash in two instalments.
Further, a motor vehicle registered in your father’s name was located on the property where the crop was located. The property is owned by a lady who lives in Adelaide and she allowed the property to be share-farmed by a neighbouring farmer.
[32] 30 August 2007, no. DCCRM-07-174 Judge Rice
A fundamental impediment with this contention is that the sentencing remarks are not available to the court as proof of the underlying facts. They do not come with the purview of s51(2). Even more fundamentally, none of those matters identified in the sentencing remarks were put to Salvatore Condo under cross-examination. Thus he was deprived of the opportunity of answering them and the Court was deprived of the opportunity of assessing those answers. Once again the joint judgment in MWJ v R quoted earlier in these reasons, are of equal application here.
The fact of the matter is that no admissible material was tendered to prove Salvatore Condo was involved in the commission of the subject offence. Section 59(1)(c)(i) is less demanding from the point of view of an applicant, that than Victorian equivalent, which requires an applicant to prove he or she was not involved in any way in the commission of the offence.[33] More than that, in order to find an applicant was involved in the commission of the relevant offence, there must be evidence he or she “knew of the offence and must at the very least condone or permit the commission of the offence”: Le v Director of Public Prosecutions (Vic),[34] Lyall v Solicitor-General.[35] There is no such evidence in this matter.
[33] Emphasis supplied. See s101 Proceeds of Crimes Act 1987 (Cth), s52(b) Confiscations Act 1997 (Vic).
[34] (2007) 171 ACrimR 196 at 202 [19].
[35] [1997] 2 NZLR 641 at 648.
Conclusion
As a consequence of the above findings, the application by the Director of Public Prosecutions (SA) for an instrument substitution declaration under s48 of the Act is dismissed on account of the failure to prove the subject properties were of the “same nature and description” as each other and on the further basis that it is not proven the Cobera property was unavailable or unable to be forfeited. The application for forfeiture under s47 is therefore refused. Had an order for forfeiture been appropriate, orders excluding the entire interest of Maria Condo and Salvatore Condo in the whole of the land comprised in Certificate of Title Register Book 5423 Folio 806, being allotment 468 filed plan 177674 in the area named Renmark West, would have been appropriate in the circumstances. Their interest was relevantly a one-half legal interest as tenants in common in the Renmark property, the value of each being $40,000. That being so, there is no necessity to proceed to the ss78 and 80 applications.
Orders
As matters stand the applications for an instrument substitution declaration and for forfeiture by the Director are dismissed. There is no necessity therefore in making any orders on the application by the interested parties Salvatore and Maria Condo, although the parties should have liberty to apply should they feel further orders are necessary in light of the above reasons. The parties are entitled to be heard on the issue of costs, bearing in mind s227 of the Act.
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